Medicare systems taskforce head only in the job for a month

Written by Kate McDonald on 10 February 2016.

The head of the digital payments services taskforce in charge of investigating whether to privatise the Medicare and aged care payment systems was only appointed last month, has not been given any terms of reference and does not know the name of the IT systems used by the Department of Human Services for Medicare transactions.

In an at times fiery Senate community affairs legislation committee hearing today, Department of Health secretary Martin Bowles and digital payments services taskforce lead John Cahill were unable to name the systems used, but Mr Bowles claimed that some were up to 30 years old, they were inefficient and were in need of an upgrade.

Mr Bowles said the choice of whether to privatise the systems or keep the back office functions in-house was “not a fait accompli” but he emphasised that no Medicare service provision was involved and he said characterisations of the plan as “privatising Medicare” were incorrect.

“We are not talking about handing Medicare over to anybody,” Mr Bowles said. “We are talking about exploring options about how to modernise payments that allows us to bring those payments into this current technology era.”

Mr Cahill, a career public servant, said he was only appointed to lead the taskforce on January 11. He has since been allocated five DoH staff to help him with the taskforce but expects membership to grow to 20, and he has a budget of $5 million to cover the initial cost of the taskforce's work.

A request for quotation (RFQ) was issued in January to a panel of eight consulting firms, including Ernst & Young, KPMG, PwC, McKinsey, Deloitte and Boston Consulting, to look at developing a business case for the upgrade to DHS systems. Quotations are due by 2pm this Friday, with a winning partner to be announced at the end of of the month.

While a report in the West Australian on Monday stated that the outsourcing of Medicare and aged care payment systems would form a large part of Treasurer Scott Morrison's first budget, Mr Bowles said the project itself was likely to last for several years and was in its very early stages.

Industry experts have reacted with concern about the plans, with medical billings specialist Margaret Faux saying the complex billing procedures would not be within the grasp of any of the named private sector organisations. The West Australian named Australia Post, eftpos providers, Telstra and the big banks as showing interest.

The potential upgrade was first put forward in the May 2014 budget, when $500,000 was put aside to begin a preliminary search for a new payment system.

Then health minister Peter Dutton issued a request for expressions of interest from the private sector to provide claims and payment services in August 2014, but nothing has been heard since and Pulse+IT understood the idea had been dropped following the cabinet reshuffle that saw Sussan Ley take over the health ministry.

It was understood that the complexity and enormous cost of the upgrade to the Centrelink payment system, known as ISIS, took precedence over the Medicare payment system. The cost of upgrading ISIS is in the region of $1 billion, but former Treasurer Joe Hockey and then Minister for Social Services, Scott Morrison, decided not to outsource the operation of the system.

Mr Bowles told the Senate Estimates hearing today that discussions on upgrading Medicare payment systems had been held within the department last year but actual progress was at its very early stages. He said while the taskforce would look at alternatives to existing systems, it might be the case that DHS would keep its existing role.

However, under intense questioning from shadow minister for human services Doug Cameron, neither Mr Bowles nor Mr Cahill could name what systems DHS used for Medicare payments.

“You are in charge of it, but you don't even know the name of the system that you are going to privatise?” Senator Cameron said.

“What is the system you are looking at changing, the name of the system and the problems that this system has?"

Senator Cameron said what was in place now was effective, but Mr Bowles said he challenged the notion that it was as effective as it could be.

“We are looking at what is the best way of looking at these payment systems into the future,” Mr Bowles said. “No decisions have been made around the wholesale outsourcing, where it goes or who it will go to, any of those issues at this stage. We are in the early stages of this conversation.”